April 10, 2007

There are bullies everywhere. In high school, there were the high school bullies - typically the jocks. In politics, there are the backroom bullies who rig the elections - yes, even in America. In every American town, there are bullies by decree - yes, the police. And guess what? In every single case, there is nothing you can do about these bullies. They've got power. Like today, when I got a ticket for allegedly rolling through a stop sign. Was I going to argue with the cop? In my dreams. That would have made my moving violation into an arrest. What do I have to gain from that? You know it, we all hate cops, but we not only put up with them but we fund them aggressively because they provide order in a world where there is none.

You're probably wondering: What does all this have to do with technology?

The Bully of Mountain ViewIn technology, there has always been a bully. In the 60s and 70s, the bully was IBM. In the 80s and 90s, the bully was Microsoft. In the '00s and '10s, the "Bully" is going to be from Mountain View.

We all know the Bully of Mountain View. From fear of retribution, as with all bullies, this one shall go un-named. The Bully of Mountain View enjoys a monopoly in its business of selling services to hundreds of thousands of customers (some even say millions) worldwide.

The Education of a Bully.How's it so? Like most bullies, the Bully of Mountain View grew up unloved. Most of the people who work there grew up being bullied in high school where the definition of cool for their ultra uncool group was who had the coolest graphing calculator in class. These kids couldn't get a date save their life and got pushed around in school. They were traumatized as kids and couldn't spell fashion in school. Needless to say, they all ended up with big chips on their shoulders. But they learned quick from these bullies.

Traumatized, they are no more. They're all grown up, and when they joined the Bully of Mountain View, they're suddenly the coolest people in town. They used to shuffle into class head down, shoulders slumped, stuttered when they spoke. Today, they walk into meetings chin in, chest out, and head high, and don't think twice about sparring in a heated business negotiation.

It's All About the PowerMost of us love the Bully of Mountain View, but some of us also hate him. There is a bit of personal Silicon Valley history to this. I knew the bully of Mountain View well while it was growing up. While the Bully was still an adolescent, it had no traction for its super cool, whiz bang tool. The coolest kids in class were doing e-commerce infrastructure and optical networking. No one paid even a pittance of attention to it. And boy was everyone a fool for not seeing the potential in the junior Bully.

It's About Where You Are Going Not Where You AreI know a company (which I will call "Jock") very well that was offered a very large piece of equity in Bully 1.0. That company, "Jock," was one of the hottest plays in town in '99-'00. "Jock" had the finest board, the best venture money, and the coolest whiz bang tool. Needless to say, everyone wanted a date with "Jock" and "Jock" without hesitation turned Bully down. And boy does "Jock" regret its choice.

Since then, "Jock" has been left in the dust by Bully 1.0. To put into perspective, that piece of equity in Bully would have been worth 100 times the current value of "Jock." Billions. Today, "Jock" is what typically Valley people call a "living dead" company.

The Fall of the Jock and the Rise of the BullySo, why did Jock get left behind and Bully rise like the phoenix? Jock got arrogant. It had a great product, well ahead of its time. But rather than staying to true to its consumer focus, it tried to turn itself into a B2B play and chase ever escalating valuations awarded to B2B plays. While consumer dot-coms were melting down, Jock thought it could be smarter than everyone else and avert the dot-com destruction by becoming a B2B play. Unfortunately, Jock didn't have the DNA of a B2B, but the DNA of a consumer play.

Unlike "Jock," Bully stayed to its roots as a consumer play, and kept chugging along until it found its place. It didn't need to be cool, because it never was all that cool. There was no pressure to perform, but perform and deliver, it did.

The LessonToday, you see alot of excesses in Silicon Valley, like what you saw in 2000. I recently heard that a group of entrepreneurs got funded at a $100 million valuation for a company to do social networking for seniors. Stellar team, great funding, gee whiz bang tool. Another one was getting funded to do social networking for I forget what. Many companies I hear about today strive to be like "Jock." All of a sudden, social networking has become cool, because the valuations are sky high. Ask any entrepreneur who they want to be, and invariable, 8 out of 10 answers will be the next MySpace. Few of the entrepreneurs strive to be like the junior Bully.

I have a hunch that there will be many blowups for those "Jocks." If there is one lesson to be learned about all this, it's that the next big bully to come out of Silicon Valley will probably be a stealth company like the Bully of Mountain View.